Swiss Financial Center and Fintech

CFA Switzerland November 2015

Christine Schmid, Head Global Equity and Credit Research

christine.schmid@credit-suisse.com
+41 44 334 56 43

Switzerland in an international context:

Low rates for longer

Source: guardian.co.uk, breitbart.com, zeit.de, theolivepress.es, faz.net,

federalreserve.gov, boj.or.jp

Global Macro View

Summary
Economy EM slow growth or recession, Europe slight recovery, US domestic led
Solid growth in the US and (slow) normalization of inflation
Eurozone with slow recovery, but Greece unsolved
Mixed outlook for emerging markets
Uncertainties surrounding China, recession in Brazil

Monetary policy and interest rates: At its limit

First US rate hike expected 2016
Bank of England to follow with delay
Japan remains extremely expansive
EZB to do QE for longer
SNB decides upon negative interest for long time

November 2015

Manufacturing Sector Sentiment

Time for global recovery?

Last data point: 27.10.2015

Source: Bloomberg, Credit Suisse / IDC

November 2015

BRIC countries PMI manufacturing new orders

Disappointing stars
Index

Values above 50 indicate increasing economic activity

80

70

60

50

40

30

20
Jan 06

Jan 07

Jan 08

Jan 09

Jan 10
Russia

Last data point: 30.09.2015

Jan 11
India

China

Jan 12

Jan 13

Jan 14

Jan 15

Brazil
Source: Bloomberg, Datastream, PMIPremium, Credit Suisse / IDC
November 2015

Worldwide government debt as % of GDP (IMF estimations)

Emerging markets still at a low level
< 10%
10% 25%
25% ... 40%
40% 55%
55% 70%
70% 85%
85% 100%
> 100%

Last data point: 27.10.2015

Source: IMF, Datastream, Credit Suisse / IDC

November 2015

Low inflation risks, rather the opposite

High stability in developed countries
% YoY
10
8
6
4
2
0
-2
-4
1997

1999

2001
USA

Last data point: 15.09.2015

2003
Japan

2005
Eurozone

2007
Germany

2009

2011
China

2013

2015

Zero inflation
Source: Datastream, Credit Suisse / IDC
November 2015

US: Labor market improves continuously

Jobless claims in survey week vs. nonfarm payrolls
1'000s

1'000s
600

hires vs job cuts

400

100

200

200

0
300
-200
400
-400

jobless claims

-600

500

-800

600

-1000

700

2007

Last data point: 26.10.2015

2008

2009
Payrolls

2010

2011
2012
2013
2014
Initial jobless claims in survey week (rhs, inverted)

2015

Source: Datastream, Credit Suisse / IDC

November 2015

Currencies: Dollar-strength expected to continue

USD exchange rates to major currencies (2 years rolling)
135
130
125
120
115
110
105
100
95
90
Oct 13

Last data point: 26.10.2015

Feb 14

Jun 14
USD/EUR

Oct 14
Feb 15
Jun 15
USD/JPY
USD/CHF
USD/GBP

Oct 15

Source: Datastream, Credit Suisse / IDC

November 2015

Emerging markets: Brazil's economy hit by recession

Index

QoQ change (in %)

4

62

56

50

-2

44

-4

38

2008

2009

2010

2011

Brazil GDP Growth (lhs)

Last data point: 30.09.2015

2012
Brazil PMI

2013

2014

2015

Brazil Services PMI

Source: Bloomberg, Credit Suisse / IDC
November 2015

China: Recent stock market crash

Not for the first time ...
000'S
30

25

20

15

10

5
Jan 05

Jan 06

Jan 07

Last data point: 26.10.2015

Jan 08

Jan 09

Jan 10

Jan 11

Jan 12

Jan 13

Jan 14

Jan 15

Source: Bloomberg, Credit Suisse / IDC

November 2015

10

Europe: Continental Europe GDP growth

Back to the positive side
Real GDP growth (QoQ, %)
1.0

0.5

-0.5

-1.0

-1.5
Q2
2011

Q3
2011

Q4
2011

Q1
2012

Q2
2012

Q3
2012

Germany

Q4
2012

France

Q1
2013
Spain

Q2
2013

Q3
2013

Q4
2013

Q1
2014

Q2
2014

Italy
Source: Datastream, Credit Suisse / IDC
November 2015

11

Europe: Unemployment Rates

Sustainable recovery in southern Europe?
%
30

25

20

15

10

0
Jan 95

Jan 97

Jan 99

Jan 01

Eurozone
Last data point: 15.08.2015

Jan 03
Germany

Jan 05

Jan 07

Jan 09

France

Italy

Spain

Jan 11

Jan 13

Jan 15

Greece
Source: Datastream, Credit Suisse / IDC
November 2015

12

Europe: Private consumption loosing steam

% YoY, 3 month average
5.0

Index, Level

0
2.5
-10

0.0
-20

-2.5

-30

-5.0
1996

-40
1998

Last data point: 15.10.2015

2000

2002
2004
Retail sales

2006
2008
2010
Consumer confidence (rhs)

2012

2014

Source: Datastream, Credit Suisse / IDC

November 2015

13

Interest rates: Time to speak about a turnaround?

Yields of 10 year government bonds
Yield in %
6.0
5.0
4.0
3.0
2.0
1.0
0
-1.0
Oct 05

Oct 06

Oct 07

US Treasuries
Last data point: 23.10.2015

Oct 08

Oct 09

German Govt Bonds

Oct 10

Oct 11

UK Govt Bonds

Oct 12

Oct 13

Oct 14

Oct 15

Switzerland Govt Bonds

Source: Bloomberg, Credit Suisse / IDC
November 2015

14

Switzerland: Monetary policy no room to move for the SNB

Waiting for EUR-recovery?
1.70
1.60
1.50
1.40

EUR/CHF

1.30
1.20
1.10
1.00
0.90
1999

2001

2003

2005

2007

2009

2011

2013

2015

Source: Datastream, Credit Suisse / IDC

November 2015

15

The Swiss Financial Center

1
0.7

Others (incl. Dubai &

Monaco)

0
0.7

United States

1.0

Luxembourg

1.1

United Kingdom

1.2

Caribbean and Panama

1.4

Channel Islands and

Dublin

Hong Kong & Singapore

Switzerland

Destinations of offshore wealth

in USD trillion
3

2.3

0.6

Source: Boston Consulting Group Global Wealth 2014

November 2015
17

Contribution of financial centers to GDP

30%
25%
20%

15%
10%
5%
USA*

UK

Luxembourg*

Germany

Singapore

Hong Kong*

Switzerland

0%

* values for 2012

Source: SIF, German Federal Statistical Office, Statistics Portal Grand Duchy of Luxembourg, FSO/SECO, Singapore Department of Statistics, Office for National Statistics (UK),
Bureau of Economic Analysis (USA), Census and Statistics Department (Hong Kong)
November 2015

18

Positioning of the Financial Centers

Key Strengths
Switzerland
The wealth management hub of the world
Traditional safe haven with stable political environment, high
competitiveness and significant innovative capabilities.
The largest offshore wealth management center.
Hong Kong
Trade & financial hub for dynamic Greater China
Benefits from rapid economic growth.
Major financial center for trade finance.

Singapore
Aspiring global wealth management center
Stable political climate, favorable tax regime.
Attracts clients from Asias rising economies.
Source: Credit Suisse Switzerland as a financial center 2014
November 2015

19

Switzerland, Hong Kong & Singapore

Leading countries in terms of competitiveness

GDP per capita

(USD, 2013)

WEF Global Competitiveness Index

(Rank, 2013-2014)

IMD World Competitiveness Score

(Rank. 2014)

Human Development Index

(Rank, 2013)

81,000
1st (-)
2nd (-)
3rd (-)

2
2

2
2

55,000
2nd (-)
3rd (+2)
9th (+3)

3
3

3
3

38,000
7th (-)
4th (-1)
15th (-)

Source: Worldbank, World Economic Forum, IMD, United Nations Development Programme
November 2015

20

Traditional success factors of financial centers

1.
People

5.
Competitiveness

4. Infrastructure

Success
Factors

2.
Bus.
Environment

3.
Market
Access
Source: Credit Suisse Switzerland as a financial center 2014
November 2015

21

Future success factors for international financial centers

Digitisation
FinTech

Lack of internationally
harmonized regulation
Costs
and rules

Risks/
Opportunities

Data security and

storage
Technology
infrastructure

CyberCrime

Business
environment

Market
access

Little bureaucracy
Well-capitalized
banks

Growth in a
multipolar world Regional wealth shift

November 2015

22

Swiss Financial Center

Banking a Sector in Transition
Financial Crisis
Loss of confidence /
risk aversion
More rigorous equity capital
and liquidity guidelines
Flood of regulation
Deleveraging
Extraterritoriality
Fragmentation

Development of Real Added Value

(Switzerland;1993=100)

Digitization
Increasing transparency
Decline in transaction costs
Democratization of knowledge
Rise of social media
Data security/individual
privacy

160
150
140
130
120
110

100
Debt Crisis
Expansive monetary policy
Pressure to comply in tax
matters
Maximization of tax revenues
and introduction of new taxes
(e.g. FTT, etc.)
Weak euro/strong franc,
negative interest rates

90
80
1993

1998
Banks

2003

2008

2013

Shift of Balance
Increasing significance of
emerging markets
Rising importance of shadow
banks

Swiss economy

Source: BAKBASEL. (2014). The economic significance of the Swiss financial sector.

November 2015

23

Costs on the rise size and e matters

Global Rise in Costs and Strong Growth of Competitor Locations
Cost/Income Ratio in Private Banking
Europe
60%

07

73%

08

78%
2'500

08

09

10

11

12

71%

73%

75%

75%

09

10

11

12

Cross-border assets under

management in 2013 (CHF bn)
Switzerland

2'000

1'500

Caribbean & Panama

1'000

GB

Channel Islands &

Dublin

Singapore
US

Asia
68%

77%

65%

North America
68%
64%

07

75%

Size vs. Growth of Offshore Wealth Centers

73%

76%

77%

79%

76%

Luxembourg

500

Hong Kong

0
07

08

09

10

11

12

0%

Sources: Booz & Company. (2014). Global wealth management outlook 201415.; SBA & BCG (2014). Actively shaping change.

2%

4%

6%

8%

10%

12%

Growth forecast for 2013-18 (p.a.)

November 2015

24

Consolidation ongoing
Consolidation of the Swiss Banking Landscape set to continue
Number of Banks in Switzerland (Institutions)
1992
468

-185 (-40%)

Other banks
Stock market banks1
Foreign banks2
Cantonal/regional banks3
Major banks

-30 (-55%)
-10 (-24%)
-28 (-18%)
-115 (-56%)
-2 (-50%)

2013
283

Institutions specializing in securities transactions and wealth management; 2 Includes foreign-owned banks and branches of foreign banks; 3 Including Raiffeisen

Source: SNB. (2014). Banks in Switzerland 2013.

November 2015

25

Costly - Regulation: System Stability

The end to Too Big To Fail: 5% leverage and 28.6% RWA TLAC capital
Composition of FSB TLAC

Comparison of Basel III, FSB TLAC & Swiss TBTF Legislation

Basic requirements
16.0%

20.0%

Buffer1

19.5%

=19.5%-25%
CH TBTF: 28.6%

a Gone concern

25%

Total loss-absorbing capacity (TLAC)

as measure of capital robustness
Includes stabilization ("going
concern") as well as resolution
("gone concern") capital

25%

Going concern

Minimum Pillar 1 TLAC

Buffers1
~5%

20%

=19%3

15%

Capital
Conservation
Buffer 5.5%

=13%

10%

5%

Requirement for CS (as per current

status) 20%-24%2

Buffers1
~5%

Other GLAC
8%-12%

Low-Trigger
CoCos 6%

Tier 2 2.0%

Tier 2 2.0%

AT1 1.5%

AT1 1.5%

High-Trigger
CoCos 3%

Minimum CET 1
4.5%

Minimum CET 1
4.5%

Minimum CET 1
4.5%

0%
Basel III
1 Includes

FSB TLAC

Swiss TBTF Legislation

capital conservation buffer (2.5%) and G-SIB buffer (1%-2.5%); 2 CS: capital conservation buffer (2.5%) and G-SIB buffer (1.5%); 3 Based on original calibration

November 2015

26

Market Access is key for the Swiss Financial Center

Short- and Long-Term Measures to Secure Market Access as Priority
Short Term
Global

Europe

Long Term

Bilateral solution (e.g. free trade agreement, tax

treaty, financial dialogue) with Russia, Turkey, Saudi
Arabia, UAE, China, Brazil, Argentina, and Mexico

Adjustment of regulation in Switzerland, where

relevant for market access (equivalence) and
aiming at a standardized, principle-based recognition
process at EU level
Improvement of bilateral market access to key
countries (Germany, France, Italy, UK,
Netherlands, Spain)

WTO-TiSA
Greater involvement of Switzerland in
standard-setting bodies

Market access for financial services

providers as part of the future overall
European policy (e.g. via (financial)
services agreement (F)SA)

November 2015

27

For international business Switzerland joined AEOI

OECD/G20 Establish Global Standard
AEOI Standard

Functionality of AEOI

Comprehensive definition of financial information to be exchanged

automatically (including trusts)
Operational platform to be based on FATCA model 1
Multilateral legal platform based on the OECD / Council of Europe
Convention on Mutual Administrative Assistance in Tax Matters and
bilateral agreements
Monitoring by Global Forum ratings on the progress of participating
countries

Basic Documentation
Model Agreement: ensuring data protection, specialty principle,
reciprocity
Standardized exchange of information: common reporting standard
Interpretation commentary
Basic data of IT solution

2016
January 1
Launch of new accountopening processes1
1 Timeline

Taxpayer in Country A has account with bank in Country B:

Country
A

Country
B

Authority A
can review
foreign
account data

Automatic transfer
from Authority B
to Authority A

2017
January 1
Start of general data
compilation

Bank B
reports
data to
Authority B

Account number
Name, address, date of
birth
Tax ID number
Interest, dividends
Income from certain
insurance policies
Balance on account
Income from sale of
financial assets

2018
September 30
First exchange of information1

First general exchange of

information

for early adopter nations and EU

November 2015

28

Risks - Future success factors for int. financial centers

Digitisation
FinTech

Lack of internationally
harmonized regulation
Costs
and rules

Risks/
Opportunities

Data security and

storage
Technology
infrastructure

CyberCrime

Business
environment

Market
access

Little bureaucracy
Well-capitalized
banks

Multipolar world Regional wealth shift

November 2015

29

Global population growth 10 billion by 2100

Population (billion)

Forecast: +3 bn in
the next 90 yrs

10
8
6
4
2
0
1500

1600

1700

1800

1900

2000

2100

Source: United Nations, OECD, The Conference Board

Source: United Nations, OECD, The Conference Board

November 2015

30

Emerging middle class as main growth driver

Growth Engine EM Middle Class:

Over 2,5 bn in BRIC states to spend

between USD 10-100 a day

Approx. 5 times OECD volume

Em erging Consum er Survey

CS engages with AC Nielsen to
conduct primary research on EM
consumers, interviewing 15835
consumers.

Persons with daily expenditures (PPP-adjusted)

between USD10 and USD100 (m people)

Share of middle class by country

3000
2500
2000

1500
1000

2000

2015
2030

500
0
Africa

LatAm

OECD

BRICs
Source: OECD, Credit Suisse
November 2015

31

Growth of Global Middle Class driven by Asia

EM with favorable demographics

Rapidly expanding middle class in Asia

Size of global middle class (millions of people with a daily income of between
USD 10 and USD 100, PPP-adjusted)
5,000

Old age dependency ratio (po pulatio n aged 65+/po pulatio n aged 15-64 years)

80
70

4,000

60

3,000

50
40

2,000

30

1,000

20

0
2009

10
0
1950

1960

1970

1980

Emerging M arkets

1990

2000

Japan

2010
US

2020

2030

2040

Western Euro pe

2050

North America
Central and South America
Sub-Saharan Africa

2020

2030

Europe
Asia Pacific
Middle East & North Africa

Source: United Nations, OECD, Credit Suisse

November 2015

32

Ageing is a global but African problem

Emerging markets lack pension systems in need of wealth advise
Working population growth (million people)
400

Advanced economies
Africa
other developing countries
India
China

Forecast

300

200

100

-100
1955

1970

1985

2000

2015

2030

2045

2060

2075

2090
Source: UN, Credit Suisse
November 2015

33

Risks - Future success factors for int. financial centers

Digitisation
FinTech

Lack of internationally
harmonized regulation
Costs
and rules

Risks/
Opportunities

Data security and

storage
Technology
infrastructure

CyberCrime

Business
environment

Market
access

Little bureaucracy
Well-capitalized
banks

Multipolar world Regional wealth shift

November 2015

34

We Are Living In A Digital World That Is Here To Stay

And That Is Big And Fast Growing

1.4BN

ACTIVE USERS

Facebook biggest country in

the world ahead of China and
India

4.2TN

IN G-20 ALONE

Internet economy by 2016.

Were it a national economy
it would rank in the worlds
top five ahead of Germany

90%

IN 2 YEARS

90% of the global data

available today have been
created in the last 2 years
alone

Source: BCG and IMB 2014

November 2015

35

Technology Progress & Innovation Have Changed

Consumers Habits And Behaviors

97%

57%

10.4

Say An Online Experience

Influenced Their Purchase
Decision.

Talk More Online Than

They Do In
Real Life.

Average Number Of
Sources Consulted Prepurchase

Source: Google and Adweek 2012

November 2015

36

BANKING LANDSCAPE
Will Change As A Result Of These Forces
Long-term structural trends

ILLUSTRATIVE

Client Behavior

Wealth shift towards

Gen. X/Y (U)HNWIs

Declining clients
trust in banks
New quality &
quantity of regulation

Pure digital
Hybrid

Post-crises trends

Face-to-Face

&

Client Service Expectations

New technologies
empowering clients

Self-directed
Selector

Validator

Delegator

Upstart
Upstart online
online
competitors
competitors
E.g., Interactive
Brokers,
Cortal Consors, .comdirect,
Swissquote, Saxo Bank,
Wealthfront
Hybrid / Big
Hybrid / Big players
E.g., UBS, Credit
Suisse, Barclays,
Deutsche Bank,
Julius Br
Traditional
players
Traditional
players

November 2015

37

 Half of the worlds banks set to fall by

the digital wayside.
Francisco Gonzalez BBVA Chairman/CEO
BBVA is perceived as a leader in digital transformation, having
spent billions bought Wizzo, Simple.

The financial sector needs a disrupter.

If banks dont change, we will
change banks.
Jack Ma, Alibaba
November 2015

38

BANKING LANDSCAPE EXAMPLE WELLS FARGO

&

November 2015

39

What is FinTech ?
Intersection between technology and finance
Technical innovations/enabler or disrupting
technologies towards to traditional banking
Highly dynamic market (16000 startups)
Main market segments:
Analytics/ operations and risk management
Investment/ wealth management
Digital currencies
Payments
Lending and financing....
Aim to simplify and revolutionize banking

Source: Credit Suisse, CIB insights

November 2015

40

FinTech revolution
45% of independent financial advisors and 24% of bank branches to disappear by 2020E
SocGen announced to cut 20% of its branches till end 2016
While FinTech earnings for the moment lower than 1% of whole banking segments earnings, they are
expected to reach 5% by 2018
16000 start ups estimated whereof in 15 years, more than 90% of current active players will have
disappeared from the market because of unprofitability or acquisition from banks/ bigger player
The 10% that will have survived have the potential to change the banking sector fundamentally

Source: Credit Suisse, McKinsey, BCG, CIB insights

November 2015

41

FinTech in focus for funding

How much is funding to FinTech startups booming?
Almost USD 14 bn funded in last 12 months. From less than USD 1 bn in Q2 2010 to nearly USD 3 bn in
Q1 2015.
6000

250

5000

200

4000

3000
100
2000

Number od deals

Million USD

150

50

1000

0
2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Funding (FinTech)

Deals (FinTech)

Source: Credit Suisse, CIB insights

November 2015

42

Success drivers of the FinTech sector

Innovation

Lower individual costs

Lowcost

Be customer friendly
Have fast processes
Adapt to new technologies

Simplicity

Success
Drivers

Attract young talents

Bring innovative ideas
Apply existing and new technologies

Plusvalue

Market
access

Take away parts of banks

existing business volume
Create new customer needs/
serve untouched segments
Serve an increasing number of
customers

Be connected
Employ different user-interfaces (incl.
mobile)

November 2015

43

Key risks faced by the FinTech sector

Bigger
Players

FinTechs are active in

a very competitive
market

Competition

Key
risks

Larger innovator (Google,

Amazon, Apple, ...) can eat an
entire segment
Lack of client base

Longterm
profitability

Small generated revenues per

customer must cover fixed costs

Regula
-tion

Banking is highly regulated

and complex

November 2015

44

Challenges for traditional financial players Speed and

selection
Fast pace of innovation and implementation of technology
financial services players need to move quickly but processes are currently too slow
Number of FinTech firms is exploding over time driven by much lower launching costs
competition increasing

Banks are counting too much on loyalty of their customers

change of financial provider is not a big issue anymore
Goldman Sachs:

USD 4.7 trillion in revenue for traditional financial services is at risk of being displaced by
new technology-enabled entrants.

Jamie Dimon, CEO of JP Morgan Chase:

Silicon Valley is coming. There are hundreds of startups with a lot of brains and money working on
various alternatives to traditional banking.... They are very good at reducing the pain points in
that they can make loans in minutes, which might take banks weeks.

Source: Credit Suisse, CIB insights

November 2015

45

Sources of banks revenue are at risk

Retail banking revenues at risk by 2020

Mortgage
8%

Payments
25%

Consumer credit
17%

Asset management
79%

Deposits
83%

Current account
16%

Credit cards
29%
Source: Accenture, The Everyday Bank, October 2013
November 2015

46

Value chains are under pressure in retail banking

Challenge in several parts of the value chain

Product
Management

Sales

Origination

Service &
monitoring

Collections
and
recoveries

Credit risk
management

Source: Retail lending origination exercise, Accenture, Credit Suisse, companies websites
November 2015

:
47

 such as in the payments process

New players want to grab a share of the cake

Merchant

Acquirer

Network

Bank/Issuer

Consumer

Source: Credit Suisse, companies websites

November 2015

48

 or in wealth management
Banks no longer the sole provider of all services competition

Account

Proposal

Trading &
settlement

Asset allocation
optimization

Performance
review

Source: Credit Suisse, companies websites

November 2015

49

Lending
Fundamental business for traditional banks.

Notable FinTechs active in lending

All traditional segments in lending business are under

pressure. FinTechs are providing new ways of lending:

Crowdlending/ Crowdfunding
Peer-to-Peer lending
Peer-to-Business lending
Social (non-profit) lending

FinTechs are simplifying and widening the lending process. It

is much faster, uses current technologies and is enlarging
the number of players that are providing loans

Peer-to-Peer lending amounted to USD 25.5 bn in 2014

and could reach USD 290 bn in the next five years (MS
estimates)

Source: Credit Suisse, Venture Scanner, Morgan Stanley, companies websites

November 2015

50

LendingClub (www.lendingclub.com)
World largest online platform that provides
Peer-to-Peer lending
Aim to provide more attractive interest rates and
rates of returns than traditional players by
lowering operational costs
Possibility to negotiate the interest rate
Loans up to 35,000 USD
Near USD 2 bn loans have been funded in
2014

Source: www.lendingclub.com, August 2015

November 2015

51

Payment
Banks earn non-interest income from payment processing
services and help merchants set up payment systems.

Notable FinTechs active in payment

The collected fees and commissions are usually small taken

individually but aggregated they can represent a substantial
part of banks income
FinTechs are providing innovative, simpler and faster
payment solutions. Banks stands a chance if they position
themselves rapidly and acquire the new developed
technologies
43% of all FinTechs focus on payments
(Too?) many FinTechs are active in the payment space
and the market seems overcrowded; only a handful of
solutions will take the flow.

Source: Credit Suisse, McKinsey, Venture Scanner, companies websites

November 2015

52

Venmo (www.venmo.com)
Payment service to make and share payments between
friends
Since 2013, Venmo is under the control of PayPal
(PayPal bought Venmo from Braintree for USD 800 m)

Venmo differentiates itself from other competitors by the

social aspects that are coupled with each transaction (i.e.
details are shared)
Payments are sent instantly, for free, from a Venmo
account or debit card or a linked bank account. Payments
per credit cards and non-major debit cards are charged a
3% fee

Source: www.venmo.com, August 2015

November 2015

53

2015 focus - Investment & wealth management

Individualized investment solutions from banks are targeted
toward wealthy individuals. Thus, the process is often
personalized and costly

Notable FinTechs active in investment

Drive to zero cost and not time friction.

Most of FinTechs use an internal algorithm not only to
determine the risk profile of the investor but also to allocate
different portfolios.
Cost for investors are reduced to attractive levels and the
simplicity of the investment process helps FinTechs reaching
a wide audience but still very standardized at the moment
(for example ETF based)
FutureAdvisor bought by Blackrock

Source: Credit Suisse, Venture Scanner , companies websites

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Wikifolio (www.wikifolio.com)
Online investment platform (for DE, CH and AT)
Investment

Investors

Profit

Trades + Know how

Performance fees

Attractive for small investors that can look for investment ideas and invest trough
certificates that replicate a traders strategy
The platform can be risky for retail investors that follow a strategy that doesnt
match investor risk profile

Main advantages of Wikifolio are the low costs and its community
Source: www.wikifolio.com, August 2015
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Acorns (www.acorns.com)
Micro-investment app
Small amounts (spare money) are invested on a regularly basis in a
selected portfolio
5 diversified portfolios according to investors risk profile
Invested money can be withdrawn at any time and for no cost
Main advantage: low-cost and easy to use
Main disadvantage: low-expected return even for the aggressive
portfolio strategy

Source: www.acorns.com, August 2015

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Research Advise Content

Research in bank is both used internally and externally to
support the investment allocation decision in WM/AM

Notable FinTechs active in research

FinTechs innovate in the research sector by providing tools to

analyze and interpret data, that were previously non-existing
in the market
FinTechs employ the latest technology and automate most of
the research process by making use of computational power
and artificial intelligence. Reports can even be provided on a
continuous basis

Source: Credit Suisse, Venture Scanner

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Sentifi (www.sentifi.com)

Online platform to monitor financial markets participants

Sentifi uses automated detection of impactful events for listed companies
Signals are generated from machine based text analysis of publicly available information
Messages are then ranked according to financial importance

Source: www.sentifi.com, August 2015

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NY - London - HongKong...

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59

NYC FinTech Innovation Lab: Background

Financial Services Firms

Venture Capital Firms

Launched in 2011

Partnership between the NYC

Investment Fund, Accenture and
leading Venture Capital and
Financial Services Firms
Goal: attract tech firms to NYC
along with the employment
opportunities they represent
Focus is on startup and growth
phase firms that have developed
leading edge technology for
financial services firms
FinTech program now active in
London and Hong Kong

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FinTech Innovation Lab Alumni

2011

2012

2013

2014
November 2015

61

FinTech Innovation Lab Class of 2015

2015 FinTech Company

Mentors
Bank of America
Barclays
Deutsche Bank
Goldman Sachs
UBS

Digital Asset Holdings, LLC is building next generation cryptographically secure settlement and ledger services. The Company is providing safe and efficient
settlement of conventional and digital assets as well providing a digital ledger to create, issue, track and transfer mainstream financial assets.

Financial abuse of older adults is a growing epidemic, costing seniors billions of dollars annually - with trillions at risk. EverSafe is an innovative technology
service focused on safeguarding the financial health of seniors and their families. Our software protects older adults from exploitation and identity theft by
monitoring banking, investment, credit card and credit report transactions for erratic activity on a daily basis. Trusted advocates, with access to a consolidated
view of financial information, can be designated to serve as an extra set of eyes in monitoring and resolving alerts.

American Express
Capital One
Guardian Life

Max is an intelligent cash management solution that helps individual investors earn more on FDIC-insured bank deposits, automatically. Maxs patent-pending
cash sweep technology monitors interest rates and automatically reallocates funds among a client's existing checking account and higher-yielding online savings
accounts to maximize yield and FDIC insurance coverage while maintaining a desired checking account balance.
Individual investors can access Max directly at MaxMyInterest.com. Max can also be integrated into existing wealth management platforms, so that banks,
brokerage firms, registered investment advisors (RIAs) and multi-family offices can deliver this innovative cash management solution directly to their clients.

Ally
Credit Suisse
Morgan Stanley
UBS
Wells Fargo

PierceGTI is a security product company that provides instructions on how to increase security. Using global threat, artificial intelligence and local log events,
PierceGTI creates customized reports and recommendations for IT professionals to increase their security. PierceGTI leverages unique privacy-protected crowdsourcing and our Internet-scale global knowledge-base to link together customers for unified threat knowledge and increased defense.

Ally
Bank of America
Barclays
Guardian Life

PYT Funds, Pay Your Tuition, is a trailblazing financial services firm that connects families to banks with a new solution to financing education and solving the
problem known as the the "parent loan trap". We have pioneered a platform that combines online crowdfunding with bank funding to secure a private student
loan without a cosigner. Our technology innovates the way we finance education for the future and provides a more responsible lending platform to the family and
the bank.

American Express
Credit Suisse
JPMorgan Chase

Social Alpha delivers actionable insights and decision support tools for traders, analysts and investment managers, who use our real-time predictive intelligence to
increase profitable trades and reduce investment risk. We leverage advances in large-scale Machine Learning and Natural Language Processing for the real-time
analysis of millions of online news and social media sources. Our services include interactive visualizations to monitor portfolios, real-time alerts on market-moving
social media activity and low-latency feeds of social analytics.

Citi
Credit Suisse
New York Life
Wells Fargo

Ufora makes analyzing financial data at scale quick and easy by automating the engineering. Our Smart Compute platform scales any sophisticated algorithm to
any size data automatically and instantaneously, allowing analysts to address real world complexity and answer their most important questions in seconds. Hedge
funds, banks, insurers, and credit card companies use Ufora to price complex financial instruments, analyze and mitigate risk, predict and prevent fraud, and
decrease the costs of regulatory compliance. Firms using Ufora see a dramatic increase in the productivity of their technical workforce.

Capital One
Citi
Credit Suisse
Goldman Sachs
JPMorgan Chase
Morgan Stanley

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62

Mentee Opportunities
Research/Holt

Day/Transition
Trading
Algo Trading
Digital Private
Bank
Portfolio Managers
Prime Services or
Prime Consulting

Social Alpha delivers actionable insights and decision support tools for traders, analysts and investment managers,
who use our real-time predictive intelligence to increase profitable trades and reduce investment risk.

Mentors
Citi
Credit Suisse
New York Life
Wells Fargo

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63

Mentee Opportunities
CCAR Calculations/
Stress Testing

VAR or Other
Risk Calcs
Linear/Non-Linear
Quantitative Research
Algo Trading
Client Analytics, Retention
and Engagement
Surveillance and
Suspicious Activity

Securitized
Products

Fixed Income
Research

Ufora makes analyzing financial data at scale quick and easy by automating the engineering. The Smart
Compute platform scales any sophisticated algorithm to any size data automatically and
instantaneously, allowing analysts to address real world complexity and answer their most important questions
in seconds. Hedge funds, banks, insurers, and credit card companies use Ufora to price complex
financial instruments, analyze and mitigate risk, predict and prevent fraud, and decrease the costs of regulatory
compliance. Firms using Ufora see a dramatic increase in the productivity of their technical workforce.

Mentors
Capital One
Citi
Credit Suisse
Goldman Sachs
JPMorgan Chase
Morgan Stanley
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International FinTech hubs

US
Silicon Valley: General tech. environment, large startup scene, large home market, funding access.
NY: Finance focus, home of the first FinTech lab, full political support, large home market and access to
funding.
Europe
London: Finance focus, full political support and well marketed, access to funding.
Berlin: General tech. in Europe, entrepreneurial environment hip, cheap to start, funding ok, decent market
size (Germany biggest European market).
Switzerland ??
Asia
Singapore: Centralized initiative, full political support, as offshore hub for Asian clients and WM.
HongKong: Centralized initiative, full political support, expensive location thus mostly subsidized by mentors or
program owners, large potential home market (China).

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65

On track toward a Swiss Fintech Ecosystem

Setting the scene: Growing entrepreneurial start up scene
Disrupters
Agile enablers banks/insurers are in need
Incubators: Various programs launched in Geneva or Zrich
Swiss Voice: www.swissfinte.ch
Swiss Corporates (mostly tech/telco, financials):
Initiatives launched in Switzerland and abroad
Fintech challenges and innovation labs
Dedicated funding structures (CS Next, Swisscom Ventures)

November 2015

66

Switzerland with typical Swiss problems - decentralized

1. Very academic: Innovation = education (university) and brick and mortar (building)
- Only one part and slow to be built
2. Lack of official support and flagship event to coordinate and market canton by
canton approach
3. Lean regulatory process for FinTechs needed
- Dedicated FINMA team as clear entry window and one stop shop
4. Clear business focus: Align to Swiss financial center strengths WM, cyber security
and insurance

5. Limited Swiss market size, Swiss FinTechs in need of easy foreign market
access while hub in CH
- Regulatory adequacy is key
6. Great idea sold poorly: Presentation and pitching DNA by entrepreneurs
November 2015

67

Recent Survey results Switzerland mostly on track

Source: Swiss Finance Startups, Roland Berger: Swiss Fintech Study 2015
November 2015

68

CS Digital Private Bank

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Q&A

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